Create A Budget

Creation of a Budget

No man is an island. We all need help once-in-a-while. We’re not only referring to personal matters. We’re talking about financial matters. We reach a point where we have to buy something out of necessity, but we can’t pay in full just yet. An example of this is a home.

Now the time has come for you to repay on what you own. You must have the discipline to plan out how much you should have saved so when your time is up and you have to shell out the money you owed there and then (plus interest), you wouldn’t have a hard time doing so.

Prioritize which of the debts must be paid first. Prioritize your bills. Make a list so it will be more organized so you can see it right in front of you.

This is what you call establishing goals.  First establish what must be prioritized over those you could schedule paying some other time.

The essential debts are debts that should be on top of your list. These are:

• Rent or mortgage. Of course, who in his right mind won’t pay up as soon as possible? Paying your rent or mortgage bills on time helps you have a roof over your head. 
• Child support. If you don’t pay on time, there’s a possibility you can be held behind bars. 
• Utility bills. As much as possible, set aside a budget on gas, heating, water, electricity and/or telephone when you get your paycheck. In doing so, when the bill comes, then you have something prepared. 
• Car payments. This also includes car maintenance. 
• Other secured loans. If you don’t repay collaterals, the creditor takes the property even without court interference. The non-essential debts can be set aside because when these aren’t paid, they don’t have that much of a side effect. It’s a desired goal but not really a priority. The only concern that can be considered when you don’t pay non-essentials debts for a long period of time is the negative image it could project on your credit report. 
• Department store and gasoline charges. Failure to pay these charges may result in losing credit card privileges. If it’s too large, you might be sued. 
• Loans from friends and relatives. Morally speaking, there is an obligation to pay but sometimes since they’re family, we think that they will understand if we can’t. Check with them if you can delay the payment and ask them for how long. 
• Newspaper and magazine subscriptions. Little by little, if you haven’t paid, they’ll mount to sizeable figures. 
• Legal and accounting bills. If these remain unpaid after a long period of time, you might be sued. 
• Other unsecured loans. In unsecured loans, there’s no collateral for the debt. This means that the creditor can sue and then collect the debt.

Here’s the confusing part. Some of the bills border between essential and non-essential. If you let these bills defer for a long period of time, it could have consequences in your personal life.

• Auto insurance. The consequence in some states is losing your driver’s license. 
• Medical insurance. If you have a tainted record, you might have a hard time getting new insurance in the future. 
• Credit and charge cards. If you don’t pay your bills on time, you might lose your credit privileges and would have a hard time applying for a new credit card.

Now that we laid out the groundwork on how you can prioritize which bill to pay first, we move on to having a timeframe.

It’s best that you have a calendar in front of you. A palm pilot or the calendar in your Microsoft Office program will do. Mark the dates wherein you would have to pay the specific debt – be it essential or non-essential. Then what you can do is set aside the bill that is allotted for that debt.

As for the budget, prevention is always better than cure. You know how much you get in a month. Keeping that in mind, you must allot how much percentage of your salary shall go to pay certain expenses. Then do your best to stick to that budget.

If “X” is how much you should spend for leisure, then that’s how much you should spend for leisure. If at one point, it went overboard, then there would have to be a sacrifice on another aspect, such as food. That seems off, right?

So even in budgeting, you must also list which is number one for you. Have the discipline to stick to your priority, your budget and your time frame. If you succeeded, paying the bills won’t be any problem.

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